NJ Department of Health Changes Course on Medical Marijuana Licenses – Potential Licenses Reduced to 24

NJ Department of Health Changes Course on Medical Marijuana Licenses – Potential Licenses Reduced to 24

On July 1, 2019, the New Jersey Department of Health (NJDOH) issued a new Notice of Request for Applications (Notice), replacing the previous Notice that the NJDOH had issued last month, and announced that it is seeking new applicants to operate up to 24 new medical marijuana Alternative Treatment Centers (ATCs).  The July 1st Notice represents a significant reduction in the number of proposed ATCs compared to last month’s now-rescinded Notice, which had indicated the Department was previously seeking up to 108 new ATCs.  Applications for the new ATC licenses will be available on July 15, 2019.  The new deadline for submission of dispensary applications is August 21, 2019, and cultivation and vertically-integrated applications are due August 22, 2019. 

I.  Overview and Recent Updates

Last month, the NJDOH issued a much-anticipated (and now-superseded) Notice and announced that it was seeking new applicants to operate up to 108 new medical marijuana ATCs.  Applications for the new ATC licenses were set to be available on July 1, 2019.   Subsequently, the NJDOH withdrew the prior Notice, and, on July 1, 2019, it posted a new Notice announcing that it would be seeking applications for only 24 new ATCs.
The new Notice of RFAs came on the heels of the passage of the “Jake Honig Compassionate Use Medical Cannabis Act,” aimed at expanding the State’s medical marijuana program.  After a series of rewrites and votes on the bill, Governor Murphy is slated to sign the bill today, July 2nd.  As of July 1, 2019, there are over 49,000 registered patients in the Garden State’s medical marijuana program.

II. The Number and Division of Permits

Through the new Notice of RFAs, New Jersey is seeking new applicants to operate up to 24 new ATCs and contains several changes from the prior notice.  The new Notice provides for separate permits for cultivators, dispensaries, and vertically integrated permits as follows:  up to 5 cultivation permits, up to 15 dispensary permits, and up to 4 vertically integrated permits.  Each vertically integrated permit includes 3 endorsements:  1 cultivation endorsement, 1 manufacturing endorsement, and 1 dispensing endorsement.

The NJDOH will seek up to the following numbers of permit endorsements by region: 

Northern Region (Bergen, Essex, Hudson, Morris, Passaic, Sussex and Warren Counties):

Cultivation endorsements:         2
Dispensary endorsements:        5
Vertically integrated permits:      1

Central Region (Hunterdon, Middlesex, Mercer, Monmouth, Ocean, Somerset and Union Counties):

Cultivation endorsements:         2
Dispensary endorsements:        5
Vertically integrated permits:      1

Southern Region  (Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester and Salem Counties):

Cultivation endorsements:         1
Dispensary endorsements:        5
Vertically integrated permits:      1

Additionally, the NJDOH will seek up to 1 additional vertically integrated permit that will be sited during the awards process “based on overall score and patient need at the time of award.”  The Department commented that “[b]ecause the patient population is expanding so quickly and is expected to accelerate, the Department anticipates that this flexible approach for up to 1 vertically integrated permit will allow for 1) the most qualified applicant to be chosen and 2) that the award can most adequately respond to real time changes in enrollment.”

In order to “provide for opportunities for different sized businesses to participate in the RFA,” the Notice also provides that the NJDOH will seek to issue cultivation endorsements in the following tiers of canopy sizes:

  •     20,001 square feet to 30,000 square feet:  up to 2 cultivation endorsements.
  •     5,001 square feet to 20,000 square feet:  up to 2 cultivation endorsements.
  •     Up to 5,000 square feet:  up to 1 cultivation endorsement.

Vertically integrated applicants may choose any of the canopy tiers.

III. Eligibility

The Department will seek applications from both for-profit and non-profit entities, as the statutory requirement for two nonprofit ATCs in each region has already been met.  Entities may seek a maximum of 3 total permit endorsements and may only submit one application per region.  A separate application is required for each endorsement; however, an applicant for a vertically integrated permit may submit one application because all endorsements will be located within the same region.  Therefore, the only applicants eligible to submit an application for more than 1 endorsement per region in the Notice are applicants for vertically integrated permits. Applicants cannot submit for both vertically integrated permits and individual endorsements. Applicants submitting for individual endorsements can submit applications for up to 3 endorsements, but they cannot be in the same region(s). 

Current ATC permit holders (including awardees from December 2018) are not eligible to participate in the new RFA.

IV. Timing

The current application submission and review schedule is as follows: 

Monday, July 15, 2019 (or before):  Forms posted.
Friday, August 2, 2019: Pre-Application Webinar.
Wednesday, August 21, 2019 at 3 PM EST :  Submission Deadline for Dispensary Applications.
Thursday, August 22, 2019 at 3 PM EST : Submission Deadline for Cultivation and Vertically-Integrated Applications.

V. Review Criteria

Applications must include a full and complete response to each of the criteria specified in the Notice of RFAs, as well as completion and submission of all mandatory information, or risk disqualification.  If the application is found to be complete, then the application will be reviewed and scored by a selection committee that “shall be chosen for their expertise and shall be free from conflicts of interest.”  The Notice provides that the selection committee will score the applications based on the RFA criteria, and then the Department will compile the scores and issue its Final Agency Decisions (FADs).  FADs will be based on scoring, location (region and county), the limitations outlined under the eligibility criteria of the RFA, and any other criteria the Department determines is consistent with effectuating the goals of the Act.

The review and award schedule will reportedly be determined based on the volume of applications received, and the Notice provides that the Department may stagger awards by type of application (vertically integrated, cultivation, or dispensary).  Awards based on the RFA shall be valid for the following time frames:

Cultivation endorsements and vertically integrated permits: 18 months
Dispensary endorsements: 12 months
 
VI. Scoring

Similar to the last round of RFAs, the Notice outlines two parts to the RFA:  submission of mandatory information and scoring criteria.  The mandatory information includes 14 categories of information including, but not limited to:

  • certain corporate information including a copy of the entity’s organizational documents or bylaws and evidence of good standing;
  • a detailed list of the proposed ATC’s employees, principal officers, and members;
  • a list of all persons or business entities having five percent or more ownership in the ATC – whether direct or indirect;
  • the mailing and physical address of the proposed ATC, and evidence of ownership or lease of the proposed site;
  • written verification of the approval of the community or governing body of the municipality in which the ATC is or will be located;
  • evidence of compliance with local codes and ordinances;
  • text or graphic materials showing the exterior appearance of the ATC and its site compatibility with commercial structures within the immediate neighborhood;
  • floor plans of the proposed ATC; and
  • all proposed or actual contracts, term sheets or other agreements related to management, intellectual property, real estate, equity in, or funding of the proposed ATC.

With respect to scored criteria, the Notice includes seven criteria.  Below is a summary of the seven broad categories of criteria—the most points for which are apportioned to Criteria 6 and 7:

Criterion 1:  Ability to meet the overall health needs of qualified patients and safety of the public (30 points).  The measures include a security plan, environmental impact plan, and a quality control and quality assurance plan, each worth 10 points.
Criterion 2:  History of compliance with regulations and policies governing government-regulated marijuana programs (20 points).
Criterion 3:  Ability and experience of applicant in ensuring an adequate supply of marijuana  (20 points).
Criterion 4:  Community support and participation (20 points).
Criterion 5:  Ability to provide appropriate research data (10 points).
Criterion 6:  Experience in cultivating, manufacturing, or dispensing marijuana in compliance with government-regulated marijuana programs  (100 points).  With regard to Criterion 6, applicants need only respond to the measure that is applicable to the endorsement being pursued.  The measures for this criterion include a "Cultivation Plan," "Manufacturing Plan," or "Dispensary Plan."
Criterion 7: Workforce and job creation plan, including plans to involve women, minorities and military veterans in ATC ownership, management and experience with collective bargaining in cannabis industries  (100 points).

If you have any questions regarding an issue raised in this alert, or would like assistance preparing an ATC application, please contact the authors or the attorney at the firm with whom you are regularly in contact.

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